This piece is part of my 2016–2026 archive migration. Some original formatting, content, and external links may be missing, changed, or not be optimized.
Is multi-tasking smart when it comes to your money?
But here’s the problem: you can’t get back time. And TIME is the greatest gift for savers and investors because of the magical term: compound interest.
Paying off your debts could take several years, which means you lose out on years of compound interest. The more time you give yourself to invest, the greater your rewards. Why not invest now and eradicate debt? You can do both. I did.
3 Month V. 12 Month
Dave Ramsey recommends establishing a $500–$1000 emergency fund, but that doesn’t cut it for most people with an average monthly expense load.
It’s financially healthier and safer to build an emergency fund that is fully stacked for 12 months.
You might hear the recommendation to pay off your debts before building an emergency fund, but if you don’t have a big enough emergency fund, you could dig yourself into a giant debt hole because you don’t have the cash on hand to pay for the unexpected expenses. If you don’t have the cash to pay for something, what will you use? Most likely a credit card or loan of some sort. The more you borrow, the longer it takes to escape debt.
Recommendation
Invest a percentage of all of your income you receive into building an emergency fund. You won’t regret it. And you can do multiple things at once. Yes, laser focusness brings quicker results, but quicker results aren’t always the most pragmatic solution.
Investing V. Paying Off Debt
Debt grows when you don’t pay it down, but investing grows as long as you keep saving.
Don’t wait to invest. Invest now. Max out your Roth IRA, and if you find yourself earning too much to invest in a ROTH IRA, max out your employer’s 401k. If you don’t have an employer, get a brokerage account, and start investing in mutual funds, private equity, real estate, REITs, and other forms of investing that align with your risk tolerance.
Investing is too severe a business not to participate in. Get started ASAP. You don’t need to be an expert; you just need to start.
If you don’t know how to invest, get involved with Robo-investing. Robo-investing will give you the benefits of investing without doing any work. Robo-investing automatically allocates your money based on your risk tolerance and rebalances your portfolio based on market conditions.
For free personal finance classes, calculators, and more, check out the MOAM reader resource page.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.